MILAN, July 31 (Reuters) - Europe’s most indebted utility, Enel, plans to simplify its operations in Spain and Latin America to ensure more cash flows into its coffers, and may reduce its stake in Spanish unit Endesa as a result.

The reorganisation is focused on stripping out Endesa’s Latin American assets to give Enel more direct control over them as it tries to reduce debts that stood at 43.1 billion euros ($57.7 billion) at the end of June, up 8.5 percent from the end of December.

“The reorganisation is to reduce complexity and also increase the focus on growth areas,” Enel Chief Executive Francesco Starace said on a conference call on first-half results.

Under the plan, Enel will buy from Endesa a 60.62 percent stake in Enersis, the parent company for the group’s Latin America operations. Endesa will then pay a special dividend to its shareholders equal to at least the value of the sale.

“We have not decided what to do with Endesa after the operation... One of the options we have is to sell further Endesa shares,” Starace said.

Latin America and Iberia accounted for around 40 percent of the group’s core earnings of 16 billion euros last year.

Enel, which is Italy’s biggest utility, intends to grow further in South America while creating a stable and well-defined dividend policy at Endesa.

The reorganisation, which is expected to be completed in the last quarter of this year, could help boost Enel’s group net income by around 70-80 million euros, CFO Luigi Ferraris said.

“It’s fine and a smart way of getting more control in Latin America while decreasing its presence in Spain and raising a bit of cash. But it’s not a panacea for the debt and fundamentals are still going down the toilet,” a London-based analyst said.

EARNINGS FALL

State-controlled Enel, like other big utilities across Europe, has seen its traditional generation business threatened by a mix of low wholesale power prices, weak demand due to the economic crisis and a boom in rival renewable energy.

In March it cut its dividend for 2013 and said it would mothball 8 gigawatts of capacity in its home market and Spain.

Enel’s core earnings fell 3.3 percent in the first six months of 2014 as regulatory changes in Spain and a weaker performance in Latin America and its renewable energy business took their toll.

Earnings before interest, tax, depreciation and amortisation in the period were 7.88 billion euros, above a consensus analyst estimate of 7.74 billion from 14 brokers provided by the company.

Enel said it would continue to focus on debt reduction under Starace, the former head of Enel’s renewable unit Enel Green Power who took over from Fulvio Conti as Enel CEO in May.

Starace said the company would try to sell assets in Slovakia and Romania to help raise around 4 billion euros this year.

It would identify a pool of assets worth around 8-9 billion euros that could be sold to reach the 4-billion target. But he said Enel’s OGK-5 generating company in Russia was not one of those assets.

“It is not wise to sell assets in Russia at this moment,” Starace said. Russia is the target of sanctions by the U.S. and Europe over its role in the Ukraine crisis.

Starace said the disposals target could be increased if needed for investment purposes.

He said Enel was still targeting net debt of about 37 billion euros this year and core earnings of about 15.5 billion.